The Gower peninsula muddies the waters

Reading the Supreme Court’s decision in Arnold v Britton & Ors [2015] UKSC 36 put me in mind of something that happened when I was in practice.

We had taken on a case involving the enforcement a bitterly contested ICC award in India. We suspected that the losing side would seek to challenge the award on the ground that it was contrary to public policy, so we asked a recently retired judge of the Supreme Court of India for his opinion on whether the award violated public policy. After reading the award carefully, he gave us an impeccably reasoned opinion stating that the award was not contrary to India’s public policy. Unfortunately, for reasons that never became clear, he also gave an opinion to the other side stating that the very same award was contrary to India’s public policy.

Both opinions emerged a fortnight later, at a meeting with the other side. The solicitor on the other side was really a fine, upstanding sort of chap. He snatched our opinion, compared it with his for a few minutes, and then said somewhat ashen-faced, “I’m sure these two opinions can be reconciled somehow.”

That is pretty much what I was thinking of as I tried to puzzle out how we might reconcile the decision in Arnold v Britton with Chartbrookand Rainy Sky. Of course, the Supreme Court quite unambigiously affirmed both cases, and as common lawyers we’re good at reconciling quite contradictory cases through our own form of pilpul. Nevertheless, I think four points are clear, and two of them mark issues that make Chartbrook and Rainy Sky very difficult indeed to reconcile with Arnold v Britton:

Pace Lord Hoffmann, but it is now very clear that there is a limit to the amount of red ink that the court can spill in correcting a contract, and it is also clear that not all judges are equally moved by the fact that the contractual provision before them makes no commercial sense.

It seems quite clear that the decision in Chartbrook was far more influenced than the Court necessarily acknowledged by the evidence that was admitted for the purpose of rectification. I generally support the exclusion of pre-contractual negotiations in evidence – having participated in that process as a solicitor, I’m acutely conscious of how misleading texts generated in that context can be. But if interpretation is going to play the role of rectification, as it did in Chartbrook and as it arguably was called on to do in Arnold v Britton, the exclusion looks quite unsustainable. Of course, the courts could always stop using interpretation that way, and focus more on whether rectification should be available in a broader category of cases instead, but that is extremely unlikely to happen (although it would arguably better than the current state of affairs).

The retreat of private law in favour of the regulatory state continues. The Supreme Court suggested that the individuals in question appeal to Parliament. This is unrealistic, to put it mildly. Getting anything on the Parliamentary agenda in the modern context is next to impossible. However, this case makes it clear that achieving fairness is not a concern of legal doctrine or of bodies tasked with applying legal doctrine. That is a matter for the legislature and executive. If one wants unfair clauses in tenancy agreements to be controlled, one must look to executive or legislative action, not to judicial action. I would expect that many, if not most, contract lawyers will regard this as an appropriate position to take.

The difficulty arises from the fact that as long as both Chartbrook and Rainy Sky continue to stand, the only way to reconcile them with Arnold will lead us to a position where the courts are more willing to deploy discretion in the interests of fairness in commercial contracts than they are in non-commercial contracts. I do not regard such a position as particularly defensible.

A fully relational contract law would have a far more elegant solution, but that is an issue for another day.